A construction company has been offered a build-operate contract for $7.8 Million to construct and operate a trucking route for fie years to transport ore from a mine site to a smelter. The smelter is located on a major highway and the mine Is 3 km into the bush off the road. Construction costs are estimated as follows: Upgrade to the highway (i.e repaving) will be $200 000/km New gravel road from the mine to the highway will be $500 000/km Operating conditions are as follows: There will be 100 return trips each day for 300 days a year for each of the Five years the mine will be open Operating costs on the gravel road will be $65h and average speed will be 40 km/h Operating costs on the highway will be $50/h and average speed will be 70km/h. Explain what aspects should be taken into consideration when determining the path the trucks should follow. Determine the distance of paved and gravel sections producing optimum conditions (maximum profit). What is the maximu
